Case Law Details
Parry Sugar Industries Limited Vs DCIT (ITAT Bangalore)
The issue under consideration is whether the disallowance made u/s 40(a)(ia) of the Act for non-deduction of tax at source from the payment made towards Harvesting charges is justified in law?
In the present case, the assessee is a company engaged in the business of manufacture of sugar and generation of power. During the relevant year, the assessing officer noted that the assessee has paid Harvesting Charges for the harvesting of sugarcane without deduction of tax at source in both the years. Accordingly, he proposed to invoke the provisions of sec. 40(a)(ia) of the Act for disallowing the payments so made without deduction of tax at source.
ITAT states that, the price of sugarcane is fixed at ex-factory gate and not at ex-field. If the price is fixed at ex-field, then the responsibility to harvest and transport the sugarcane would be that of the assessee herein. In the instant case, the purchase agreement clearly states that the price fixed is at ex-factory gate and the responsibility to harvest and transport sugarcane is that of the farmer. Under the purchase agreement, the farmer agrees and authorises the assessee to harvest and transport the sugarcane on his behalf. Further he agrees that the expenditure incurred in this connection shall be adjusted against the sugarcane price. The assessee has not claimed harvesting and transportation expenses separately, since it is not the expenditure of the assessee. The payment made on behalf of the farmers, in effect, constitute purchase price of sugarcane only, since the said payment has been adjusted against the purchase price. The assessee has only acted as agent of the farmers in connection with harvesting & transportation and hence the responsibility to deduct tax at source shall lie on the shoulders of the farmers only.
Hence, ITAT hold that the assessee is not liable to deduct tax at source from the harvesting charges paid by it on behalf of the farmers in both the years. Accordingly, they set aside the orders passed by Ld CIT(A).
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